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-   -   Has the wealth effect changed your spending? (https://www.early-retirement.org/forums/f28/has-the-wealth-effect-changed-your-spending-89626.html)

ejman 12-05-2017 06:48 PM

Quote:

Originally Posted by audreyh1 (Post 1975038)
Anyone wanting to know the real growth of their stash, https://inflationdata.com/inflation/...alculator.aspx is a handy calculator. For inflation at the start of any year, select Dec of the previous year as the starting point.

Thank you for the calculator link although I still have a lot of difficulty correlating the official inflation rate with my personal inflation rate. According to Quicken our expenditure level pretty much has remained level year to year since ER so I guess we must be doing a lot of stealth substitutions I'm not consciously aware of. Definitely Medicare has helped immensely with HC expenses but our "normal" standard of living feels pretty much the same over the years.

dtbach 12-05-2017 06:59 PM

Quote:

Originally Posted by NW-Bound (Post 1975027)
OK. I understand now. :laugh:

Many of us, myself included, don't need to, nor want to. :)

I've upped my spending a fair amount since my NW increased by more than 140% in the last 9 years. Why not? Not a lot, but I do get better grades of food and buy appetizers, and upgrade to balcony on cruises. I could go on and on but upgrading to better stuff really only adds about 25% to the costs and does improve our lives in meaningful ways.

Don't worry, I'll still leave plenty to the kids.

audreyh1 12-05-2017 07:50 PM

Quote:

Originally Posted by ejman (Post 1975053)
Thank you for the calculator link although I still have a lot of difficulty correlating the official inflation rate with my personal inflation rate. According to Quicken our expenditure level pretty much has remained level year to year since ER so I guess we must be doing a lot of stealth substitutions I'm not consciously aware of. Definitely Medicare has helped immensely with HC expenses but our "normal" standard of living feels pretty much the same over the years.

I just do the real calcs as a measure against various models since they all use CPI. It has no bearing on our personal inflation rate.

Aerides 12-05-2017 08:00 PM

I'm not increasing anything based on the current bull, or anything recent.

But once we get close to SS/MC age, and have a good decade of ER behind us... well let's just say if we end up in one of the really good firecalc lines then yes I will definitely increase.

Danmar 12-05-2017 08:28 PM

Quote:

Originally Posted by bclover (Post 1975006)
ok, I apologize but I have to ask, what is CPP?

Canada Pension Plan.

Danmar 12-05-2017 08:29 PM

Quote:

Originally Posted by Aerides (Post 1975073)
I'm not increasing anything based on the current bull, or anything recent.

But once we get close to SS/MC age, and have a good decade of ER behind us... well let's just say if we end up in one of the really good firecalc lines then yes I will definitely increase.

Agree. Pretty much where I am now. 11 years retired age 67.

NW-Bound 12-05-2017 08:31 PM

Quote:

Originally Posted by ejman (Post 1975029)
You made me look too. According to Quicken my stash has grown 125% in nominal terms since retirement 12/31/2002 to the close today. Heavens I really do need to do something about this! But I already have a wonderful sound system - maybe I'll really should consider those Utopias after all...

Quote:

Originally Posted by dtbach (Post 1975059)
I've upped my spending a fair amount since my NW increased by more than 140% in the last 9 years. Why not? Not a lot, but I do get better grades of food and buy appetizers, and upgrade to balcony on cruises. I could go on and on but upgrading to better stuff really only adds about 25% to the costs and does improve our lives in meaningful ways.

Don't worry, I'll still leave plenty to the kids.

Now, you both make me look back further.

My current stash is 3.1x the value on 12/31/2002, in nominal terms. But I did not draw on it until 2012.

It is 1.9x the value on 12/31/2008, in nominal terms.

My earned income stopped in mid 2012, but I was working part-time since 2000 and and made enough to not draw too much on the savings.

With much of the previous expenses such as college costs gone, I can spend more on myself now, but I do not feel I need anything. When I was working part-time, there was a time we took 2 foreign trips and 2 domestic trips a year. Can't see myself doing that anymore. Getting old.

So, other than upgrading to better airline seats, I do not feel I need or want anything. Again, if my stash doubles once more, maybe I will "throw" some money away. Right now, with 2 homes, an RV, and lots of electronic toys (o'scopes, spectrum analyzers, signal generators, etc...) I have enough to entertain myself with.

PS. I bought the 2nd home in 2005. Paid more for it than for my main home. Its value is now less than that of the main home, as 2nd home market is still very soft. Would have lots more money if I didn't buy it, then spend more on maintenance and operating costs.

See, I took the reward early for the risk of being in stocks. Can't keep on rewarding myself again and again. That makes the market god angry.

Koolau 12-06-2017 03:37 AM

My RMD will increase significantly this year because of the "wealth effect" but that doesn't mean I have to spend it all. Back in 10 to 12, I didn't spend the "wealth effect" of my PM windfall. It's all part of the AA and I'm following the plan. At some point, I may up my spending somewhat, but not on the basis of a year or two of windfalls in the stock market or any other part of my AA. YMMV

traineeinvestor 12-06-2017 04:52 AM

Changes in our spending post-FIRE have been mostly explainable by factors that have nothing to do with increases in net worth - DD1 starting boarding school overseas as planned (there will be another increase in 2019 when DD2 goes to boarding school as well) and course fees for my return to university are the only significant bumps in expenses. Other than that, it's mostly a case of a little less in some areas and a little more in others.

I'm planning on spending more on travel once I've finished with study and our home mortgage is paid off.

Throwdownmyaceinthehole 12-06-2017 08:51 AM

Thanks fot the Perfect Prezzie for my hubby. Ordered it this morning. Just have to figure out how to store it and keep it away from the dog before Christmas. Oops this was supposed to post under the Serrano ham

kcowan 12-06-2017 09:40 AM

Quote:

Originally Posted by NW-Bound (Post 1975002)
We have talked about this before, but I forgot the details. Put aside SSI (US) and OAS (Ca) which none of us here would be eligible, here's the US system for non-US citizens to compare....

Not so fast here NW. OAS is means tested but is not clawed back until $75K per year. And it is gradually clawed back until totally gone after $125k or so.

So most retirees get it after 65. Another welfare program, GIS, does get clawed back for most retirees here. CPP is a totally separate COLAd DB Pension, self-funded by mandatory personal contributions, and managed by fund managers. It is not government funded like SS.

If fully-earned, CPP/OAS would generate just over $24k p.a.

MikeD 12-06-2017 10:38 AM

Quote:

Originally Posted by Meadbh (Post 1974705)
What anxiety?

My annuity will be CPP, which I plan to take at 65. It’s index linked, secure and has no fees.

What does CPP stand for? I searched the FAQ but it dinna find it.

Thanks,
Mike D.

Added-On-Edit: Oh, I should have just kept reading. I have found out and no longer need a response.

Mike D.

NW-Bound 12-06-2017 02:31 PM

Quote:

Originally Posted by kcowan (Post 1975259)
Not so fast here NW. OAS is means tested but is not clawed back until $75K per year. And it is gradually clawed back until totally gone after $125k or so.

So most retirees get it after 65. Another welfare program, GIS, does get clawed back for most retirees here. CPP is a totally separate COLAd DB Pension, self-funded by mandatory personal contributions, and managed by fund managers. It is not government funded like SS.

If fully-earned, CPP/OAS would generate just over $24k p.a.

Thanks for the explanation. OAS is not totally for the indigent as SSI is in the US, as I was mistaken.

Now, is OAS really a "freebie" or funded by a mandatory income tax? If the latter, what is the tax rate, I am curious?

Danmar 12-06-2017 05:59 PM

Quote:

Originally Posted by NW-Bound (Post 1975446)
Thanks for the explanation. OAS is not totally for the indigent as SSI is in the US, as I was mistaken.

Now, is OAS really a "freebie" or funded by a mandatory income tax? If the latter, what is the tax rate, I am curious?

OAS is not “funded” but paid out of normal tax revenues. Canadian income taxes are high(also need to fund health care) topping out at 48-53% for regular income over about $200k. Cap gains taxed at half regular income and divs taxed at sliding scale (zero up to about $70k in total income then up to about 31-40% for incomes over about $200k depending on the province). Deemed disposition of capital assets on death with any cap gains taxes owing at that point. No step ups, estate or gift taxes.

Better to be rich in the US but maybe better to be a lot less than rich in Canada methinks.

NW-Bound 12-06-2017 06:46 PM

Thanks for the explanation. I guess I could look it up, but was too lazy.

Meadbh 12-06-2017 06:51 PM

Apologies for my failure to explain CPP. So many acronyms are tossed about here, and when I am unfamiliar with them, I Google them. Sorry I wasn’t quick to the mark in answering your questions. I was out spending money. :coolsmiley: Thank you to those who stepped in to explain.

W2R 12-06-2017 07:56 PM

Quote:

Originally Posted by Meadbh (Post 1975593)
Apologies for my failure to explain CPP. So many acronyms are tossed about here, and when I am unfamiliar with them, I Google them. Sorry I wasn’t quick to the mark in answering your questions. I was out spending money. :coolsmiley: Thank you to those who stepped in to explain.

Hope you found something nice and appealing to you when you were out spending money! :)

Meadbh 12-06-2017 09:22 PM

Quote:

Originally Posted by W2R (Post 1975613)
Hope you found something nice and appealing to you when you were out spending money! :)

Yes I did, thank you! Groceries $40, wine $15, lunch with friends $25, flu shot.... oh wait, my flu shot was free!

dallas27 12-06-2017 09:49 PM

Yes, i have been paying down mortgage instead of putting it all in the 401k. Really just psuedo market timing, i have to admit.

ugeauxgirl 12-07-2017 08:08 AM

Yes. I relaxed a bit when we crossed a threshold, and then again when the nw got a little bigger. Not so much that its noticeable, (we haven't bought nicer cars) but the other day, my kids asked me to buy name brand bottled water. Paying for bottled water annoys me to begin with. I was ready to say no, when they explained that flipping water bottles is a "thing" at school, and they can't do it with the cheap water because the bottles bend, plus the caps are short and hard to put back on correctly so they tend to leak in backpacks. I thought about our net worth and said "Sure. Prefer Dasani or Aquafina?" And naturally, being 10 and 13 there was an argument about THAT as well.

On the other hand, I ragged my husband for bringing home Tito's vodka. Ridiculous waste of money. Vodka is supposed to be tasteless, how can you have vodka with improved taste??


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